The Easy Way Out Through Debt Settlement?

If you believe the radio advertisements, if you have huge amounts of credit card debt, you can simply make it disappear by calling a debt settlement company. These companies claim to be able to cut your credit card debt by more than half.

If it sounds too good to be true though:

In the case of two debt settlement companies sued last year by New York State, the attorney general alleged that no more than 1 percent of customers gained the services promised by marketers. A Colorado investigation came to a similar conclusion.

The industry’s own figures show that clients typically fail to secure relief. In a survey of its members, the Association of Settlement Companies found that three years after enrolling, only 34 percent of customers had either completed programs or were still saving for settlements.

The New Poor - Peddling Relief, Firms Put Debtors in a Deeper Hole (New York Times)

Debt settlement firms have a simple strategy they offer to people. Stop paying money towards credit card bills, and instead send the money to the company. They'll take a huge cut of the money in fees, and after a few years, (if you haven't been sued by the credit card company for failing to pay!) they'll attempt to settle your debts with the credit card company with some of the money you've sent them. The only problem is that it apparently almost never works out.

There are much better ways to lower your credit card debts, by working with the credit card companies directly or with some of the reputable companies that partner with them. CreditCard.com has an article about the best steps to take when overwhelmed by credit card debt (and includes yet another warning not to use debt settlement firms) at Credit card debt negotiation in 3 (not) easy steps.